Gilad Shalit, the Israeli soldier, who has been held in captivity in Gaza for over five years, arrived back in Israel as part of a prisoner swap with the Palestinians.

Shalit, who has been held by Palestinian militants since 2006, was shown in civilian clothes and wearing a black baseball cap, escorted by Hamas armed wing chief Ahmed Jabari and other officials of the Islamist movement.

Channel 2 television said Shalit had arrived in his homeland but there was no immediate confirmation from Israeli officials.

Israel began releasing 477 Palestinian prisoners after receiving word that Shalit was in Egyptian hands, the army said.

"Moments ago, Sergeant First Class Gilad Shalit was brought into Egyptian territory and transferred from the hands of the Hamas into the care of representatives of the Egyptian government," the Israeli army said in an e-mailed statement. "He will then meet Israel Defense Forces representatives who will escort him to the Kerem Shalom crossing, through which he will return to Israel."

In Rafah, a divided town on the Egypt-Gaza border, the Palestinian prisoners were shown flashing victory signs and smiling from their buses, before heading into the Gaza Strip.

"We are going home with dignity, thank God," one prisoner told Egyptian television.

"Thank God for this great achievement. The Palestinian people deserve to live in freedom like everyone else," said another freed prisoner, thanking Egypt for mediating the deal.

"This (exchange deal) is the first step towards the full liberation of the Palestinian people," he said.

An Egyptian security delegation and a team from the International Committee of the Red Cross had arrived at the Rafah crossing early on Tuesday to oversee the exchange.

Dozens of families had been waiting at the border, chanting, cheering and waving Palestinian and Hamas flags.

Ansaf Mohammed Yunis waited at the Rafah border crossing, hoping to see her brother Ibrahim - who served eight years of a 17-year sentence.

The family is from the West Bank but Ibrahim, who was 22 when jailed, was being freed into the Gaza Strip.

"We don't know how to feel," Mr Yunis said. "It will be a shock to see him.

"We are happy, for sure. But we are also bitter because we haven't seen him in eight years," Yunis said.

"We are not sure what's going to happen now, how long he will stay in Gaza. The future is very uncertain," she said.

The landmark deal between Israel and its bitter Hamas enemy will see Israel freeing a total of 1,027 prisoners in exchange for the release of Shalit, a soldier who has been held by Gaza militants for more than five years.

The long-awaited deal, signed last week, is the highest price ever paid by the Jewish state for a single person.